Elective Stock and Scrip Dividends
Isabel Feito Ruiz,
Luc Renneboog () and
Additional contact information
Isabel Feito Ruiz: Tilburg University, Center For Economic Research
Cara Vansteenkiste: Tilburg University, Center For Economic Research
No 2018-031, Discussion Paper from Tilburg University, Center for Economic Research
We investigate firms’ decisions to pay elective stock dividends, known in the UK as scrip dividends. Scrip dividends give investors the choice between receiving new shares or the equivalent value as a cash dividend. UK firms paying scrip dividends are more likely to be financially constrained, and scrip dividends are used more when access to external financing is costly. Our results are robust to using the 2008 financial crisis as an exogenous shock to credit supply. Cash preservation is the most important corporate incentive to use scrip dividends as they tend to be distributed in combination with dividend cuts and with major corporate investments such as debt-financed mergers and acquisitions. Analysis of US dividend reinvestment plans by which investors purchase new shares confirms firms’ cash-preservation motives.
Keywords: stock dividends; scrip dividends; elective stock dividend; optional stock dividend; dividend policy; payout policy; crisis; dividend reinvestment plans; DRP; financial constraints; financial crisis; cash retention; mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: G35 G32 G34 G01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tiu:tiucen:33035f92-6ee1-4eaf-9a67-5af664edcbfa
Access Statistics for this paper
More papers in Discussion Paper from Tilburg University, Center for Economic Research
Bibliographic data for series maintained by Richard Broekman ().